Analysis: Clock ticking on French fracking veto

France's President Francois Hollande delivers a speech during the inauguration of the new Shoah memorial in Drancy, a Paris suburb, September 21, 2012. REUTERS/Philippe Wojazer

PARIS (Reuters) - President Francois Hollande’s move to leave French shale gas untapped to protect a frayed alliance with the Greens may come back to haunt him as the economy grinds to a halt and job cuts pile in.

Possibly the biggest shale gas reserves in Western Europe, cooling ardor for nuclear, rumblings of dissent from his industry minister and pro-shale pleas from bosses and unions alike, keen for more jobs, will combine to erode his resolve.

Hollande hit a publicly tough tone against fracking - the high-pressure pumping of water into rock cracks to release gas - declaring it too early to rule out any environmental damage and ordering his energy minister to withdraw seven exploration permits.

Some saw that as a short-term stance aimed at persuading his Green coalition allies to back a European Union budget pact in parliament next month - a vote he must win to show euro zone states and financial markets France is playing its part in ending the euro debt crisis.

“Hollande’s speech was a political one, to repeat the essential points in the alliance with the ecologists,” said Daniel Boy, a senior researcher at the CEVIPOF political science institute of Paris’ Sciences-Po university.

However, the strategy backfired spectacularly, with the Greens signaling last weekend they would vote against the treaty anyway.

That could play into the hands of those in France who refuse to let the issue rest.

The French economy and industries ministries are being lobbied heavily on shale gas, but probably will not shift position before local elections due in the Spring of 2014, an EU parliament insider who declined to be named said.

Advocates of shale gas argue that a boom in its production in the United States has already cut gas prices by half in four years - while France’s regulated gas tariffs have risen some 30 percent - and helped nurture the kind of “re-industrialization” which Hollande has put at the centre of his economic policy.

High-profile Industry Minister Arnaud Montebourg, who has spent months in damage-limitation mode after a spate of mass job lay-offs by French companies, is looking for sectors which can spark the industrial recovery he is charged with fostering.

Montebourg has been quick to point out that Hollande had only rejected hydro-fracking, not shale gas itself - leaving open the door to production if other techniques emerge.

French energy firms Total and GDF-Suez as well as some 18 business leaders called last week for a thorough public debate on France’s shale gas potential.

Support has also came from the head of the country’s biggest trade union CGT, an influential backer of Hollande’s election campaign who will turn into a noisy critic if he fails to bring unemployment down from 13-year highs.

“We’re going to end up being more and more energy-dependent, in spite of France’s very real assets in this field,” Bernard Thibault told Le Journal du Dimanche weekly, adding he was concerned that no new shale gas exploration was taking place.

BIG FRENCH POTENTIAL?

The U.S. Energy Information Administration (EIA) estimates shale gas reserves worth five trillion cubic meters could lie in French soil, mainly in the Paris basin and the Rhone valley - equivalent to 90 years of current French gas consumption.

“We’re being irrational,” Jean-Marie Chevalier, an economics professor at Paris-Dauphine university, said. “Before saying yes or no to shale gas, it matters to know if we have any, how much, extractable at what cost, and in which conditions we can produce it. But right now, we just don’t know.”

Some argue that by not exploiting its shale, France and other European countries in similar situations will be unable to square the circle on their most pressing economic, energy and environmental objectives.

“Wanting to reduce the share of nuclear power and at the same time revitalize the economy, reduce CO2 emissions and save money may not be compatible,” said Fatih Birol, chief economist at the International Energy Agency (IEA).

As France seeks to reduce its dependency on nuclear power, those reserves could prove invaluable in filling the gap.

Yet so far, France’s leaders have been broadly opposed to hydro-fracking, which critics argue could pollute groundwater and trigger earthquakes.

A 2011 ban on fracking was imposed under the government of Hollande’s predecessor Nicolas Sarkozy, which nonetheless also acknowledged in a report that shale gas could reduce France’s gaping energy deficit - 45 billion euros last year - by more than 5 billion euros ($6.53 billion) a year.

OBSTACLES TO FRENCH SHALE GAS

A major factor behind the take-off of shale gas in the United States is that landowners there own mineral exploration rights - encouraging many to see their backyard as a potentially lucrative shale gas well. That incentive does not exist in France, where mining rights belong to the state.

Other European countries have also burnt their fingers on shale gas, with Polish dreams shattered when actual reserves proved to be 80 percent lower than initial estimates.

While Canada’s Quebec province has confirmed an exploration and production ban on shale gas, others appear to be heading in the opposite direction. South Africa has lifted a moratorium on fracking, or hydraulic fracturing, and Britain has just named a pro-shale gas environment minister.

And French public opinion, shocked by online videos showing Americans setting light to gas coming out of their water taps, purportedly as a knock-on effect of nearby gas drilling, could also prove hard to ignore.

Street protests against fracking were held last week in the northern department of Seine-et-Marne and Gard in the south - both eyed for their shale gas potential.

Some analysts suggested the issue will become even hotter ahead of local elections due in early 2014 and could raise the same level of concern in Europe as genetically-modified foods.

“Something is happening in people’s minds,” said CEVIPOF’s Boy. “Like for GM food, shale gas fracking is something that comes from America: ‘they’re here to mess up with our beautiful country’.”

($1 = 0.7658 euros)

Additional reporting by Marion Douet, Muriel Boselli and Francois Charlottin in Paris, Barbara Lewis in Brussels; editing by Mark John and William Hardy